An investor watches a board showing stock information at a brokerage office in Beijing, China. REUTERS/JASON LEE
An investor watches a board showing stock information at a brokerage office in Beijing, China. REUTERS/JASON LEE

Tokyo — Asian shares held tight ranges on Tuesday ahead of a Federal Reserve policy meeting, but were broadly supported near six-month highs on expectations the central bank might strike a dovish tone, while fresh Brexit worries dogged the pound.

MSCI's broadest index of Asia-Pacific shares outside Japan was flat, easing back from its highest level since September 21 hit earlier in the session.

Japan's Nikkei average dropped 0.3%, while Australian stocks eased 0.1%. 

Chinese stocks held tight ranges, with benchmark Shanghai Composite hovering almost flat, the blue-chip CSI 300 declining 0.2%,  and the Hang Seng edging 0.1% lower.

All three major US indexes rose overnight, lifted by the bank and tech sectors, with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite adding between 0.3% and 0.4% each.

"Speculators appear to be betting on a rise in stock prices on the back of a dovish Fed," said Masanari Takada, cross-asset strategist at Nomura Securities. "The Fed is unlikely to kill such hopes. Yet there is a risk the Fed could tone down its dovishness." 

With global economic growth appearing to slow, traders were focused on the Fed, which begins its two-day policy meeting later in the day, for clues about the likely path of US borrowing costs.

Investors will particularly look to see whether policymakers have sufficiently lowered their interest rate forecasts to more closely align their "dot plot", a diagram showing individual policymakers' rate views for the next three years.

Also expected is more detail on a plan to stop cutting the Fed's holdings of nearly $3.8-trillion in bonds.

"A key focus is when the Fed will omit the word 'patient' from its statement, as that would be a pre-requisite for a rate hike," said Toru Yamamoto, chief fixed income strategist at Daiwa Securities.

In the currency market, the pound found firmer footing on Tuesday after slipping to as low as $1.3183 overnight as MPs cast doubt on Prime Minister Theresa May's third attempt to get parliament to back her Brexit deal.

May's Brexit plans were thrown into further turmoil on Monday when the speaker of parliament ruled that she could not put her divorce deal to a new vote unless it was re-submitted in fundamentally different form.

May has only two days to win approval for her deal to leave the EU if she wants to go to a summit with the bloc's leaders on Thursday with something to offer them in return for more time.

Meanwhile, senior diplomats said the EU leaders could hold off making any final decision on any Brexit delay when they meet in Brussels later this week, depending on what exactly May asks them for.

The dollar index against a basket of six major currencies barely moved and was at 96.475, hovering close to a two-week low. The index has lost 1.2% after hitting a three-month high of 97.710 marked on March 7.

The Japanese yen inched up 0.2% to 111.19 yen to the dollar, while the euro was almost flat at $1.1342.

Oil prices hovered just below 2019 highs on Tuesday, supported by ongoing supply cuts led by producer club Opec. US sanctions against oil producers Iran and Venezuela are also boosting crude prices, although traders say the market looks capped by rising American output.

US West Texas Intermediate (WTI) futures were little changed at $59.09 per barrel, close to the 2019 high of $59.23 reached the previous day, while Brent crude futures inched up 0.1% to $67.62 per barrel, also not far from this year's high of $68.14.